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Wednesday, September 18, 2013

Obama Brings Back the Carter Malaise

"If you are going through hell, keep going." - Winston Churchill

This quote captures the essence of an important psychological fact: most people can suffer through difficulty or tragedy if they regard it as temporary. On the other hand, when one adopts the view that the future is hopeless, either psychologically or philosophically, it leads to a much deeper existential level crisis or depression. The latter is how I would characterize American culture in the late 1970's.

Growing up in that decade, I was too young to understand much about current events or political economy, but I do recall my general feelings from watching news and listening to adults or teachers. It was horrible. After the turbulent events of the 1960's, Vietnam, and the Watergate scandal, the economy was in shambles amid the so-called "energy crisis," raging inflation, skyrocketing interest rates, and high unemployment. The never ending Iran hostage crisis taunted Americans daily culminating in Carter's bungled military rescue which only compounded the nation's angst. People were miserable, but it wasn't just a temporary sense of disappointment over some random tragic event. It was deeper and more profound. There was a sense that the future of the country was hopeless. America was in a cultural depression.

President Jimmy Carter, sensing this grievous state of affairs, gave an infamous speech in which he tried to address the "crisis of confidence" as he called it, and rally the nation around his political agenda. The speech is now accurately referred to as the "malaise speech," even though Carter never used that word. The graveness of what Carter sensed was captured by the following excerpt:

The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation.

The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.

In addition to a lack of "confidence," he identified further symptoms of hopelessness observing, "for the first time in the history of our country a majority of our people believe that the next five years will be worse than the past five years" and he pointed to "a growing disrespect for government and for churches and for schools, the news media, and other institutions." Of course, Carter believed the government could solve all these problem if not for the usual culprits: special interest groups and those pesky ideological dissenters. He claimed:

"What you see too often in Washington and elsewhere around the country is a system of government that seems incapable of action. You see a Congress twisted and pulled in every direction by hundreds of well-financed and powerful special interests. You see every extreme position defended to the last vote, almost to the last breath by one unyielding group or another.

And exactly what was this "action" he sought? According to Carter, a "balanced and fair approach" demanded "sacrifice" albeit just a "little sacrifice from everyone" - an approach that too often, he groused, "you see abandoned like an orphan without support and without friends."

The reason this is significant is that America today is in essentially the same state of economic and psychological depression as it was in the 1970's. More importantly, it is in this position for fundamentally the same reasons as it was in the 1970's, and not surprisingly, it has a leader in power with the same underlying philosophy as Carter.

The American economy in the 1970's was in shambles due to government intervention in the economy. Nixon abandoned the last vestiges of gold backed money in 1971 when he famously reneged on America's commitment to maintain international convertibility of dollars. Shorn of any sound money pretense, the American government printing press went full bore, inflation spiraled, and interest rates skyrocketed along with unemployment, while government price controls led to shortages of basic commodities (see George Reisman's The Government Against the Economy for a thorough analysis of the 1970's, also incorporated into his book Capitalism: A Treatise on Economics as Chapters 6-8 which can be downloaded here).

From the speech, it is clear that Carter seemed to regard the crisis as separate from his own statist policies or even the statist policies of his predecessors. It was as if the various economic and political maladies destroying America had suddenly emerged out of thin air like a plague and the only remedy was some mysterious undiscovered antidote. So clueless was Carter that, rather than understanding that the causes of the economic crisis were government intervention in the economy and proposing a logical solution such as removing government intervention in the economy, Carter proposed more of the very ideas that caused the mess in the first place!

For example, later in this speech he made various proposals including import quotas on oil (uh, to reduce imports of oil during a shortage!), the creation of something called a "solar bank," a "windfall profits tax" (evidently to reduce the funds with which American companies could search for and produce more oil !), forcing energy companies to switch from oil to coal (ahem), create the "energy mobilization board" (yes, a new government agency to "cut through the red tape and the "endless roadblocks" created by government agencies or, I guess, an anti-government agency agency), something he called "mandatory conservation and standby gasoline rationing," and my favorite:

I'm asking you for your good and for your nation's security to take no unnecessary trips, to use carpools or public transportation whenever you can, to park your car one extra day per week, to obey the speed limit, and to set your thermostats to save fuel. Every act of energy conservation like this is more than just common sense -- I tell you it is an act of patriotism.

In other words, rather than liberating the American economy by establishing a free market in energy, eliminating price controls, and returning to sound monetary policy, he simply proposed a new round of even more disastrous government remedies and urged the sacrifice of individual happiness by riding in cars with strangers and parking your car, evidently, to do literally nothing.

Does this all sound really familiar? Let's see - economic crisis caused by government intervention in the economy, more government intervention to solve the problems of previous intervention that causes even worse disasters, apocalyptic warnings of imminent ecological disaster, calls for more government "action" and denigration of dissenters as dangerous "extremists" or "deniers," eroding personal liberty, weakness and humiliation abroad, confusing blitzkriegs of government actions causing businesses to reduce production or close due to the uncertainty of new taxes and regulations, high unemployment, monetary inflation and debasement of the currency to finance the government's escalating debt, increases in the hoarding of precious metals, calls for ever more sacrifice from the remaining producers, growing cynicism and disrespect for law and institutions, and with no end in sight, misery, frustration, hopelessness, depression, and malaise. Wait, this is precisely the state of America today!

Why do statist policies lead to cultural malaise?

For an individual who adopts a rational approach to life, confidence in one's own efficacy, or self-esteem, is a natural result. If an individual knows that he can go as far as his ability can take him, he naturally feels a sense of confidence in the future knowing that the logical result of hard work is success. The only political precondition to productive achievement is the freedom to think and act, and as long as people are free, they must work and produce to whatever extent their ability and character allow them. Political freedom, the freedom to think, produce, and own property without coercion, is the basis of America's extraordinary productive achievements, and underlies the American spirit of self-reliance, innovation, pioneering, and entrepreneurship.

But what if an individual began to believe it didn't matter how hard he worked? What if he realized that his life didn't belong to him and that in fact, the harder he worked, the more would be taken from him? What if he knew that even if he worked very hard, a random government edict may derail his efforts at any time? What if his competitors needed only political pull rather than ability to subvert his work? What if by virtue of his efforts he was regarded as guilty until proven innocent and harassed and vilified? What if he was not allowed to charge a profitable price for his product or to freely negotiate with his employees or customers? Would he remain confident about his ability to succeed? At what point would he slow down, not seek to achieve as much, or even fire employees who now constitute more of a threat than a value? And what about those who rely on the producers for employment or for their goods and services? Extrapolated to a cultural level, at what point would cynicism, apathy, and depression replace healthy optimism about an unlimited future?

While any given individual can lack confidence to varying degrees for a variety of reasons, for a "crisis of confidence" to pervade an entire culture the precondition to individual success, i.e., the freedom to think and produce, must be upended to an extraordinary degree. Carter was right about Americans lacking confidence, but it's cause was not mysterious nor was the solution "faith" and "sacrifice." Much to Carter and Obama's chagrin, the antidote to cultural and economic malaise are simply the abandonment of their statist policies and a total rejection of the altruist-collectivist philosophy upon which they are based along with the adoption of a philosophy of rational self-interest, individual rights, free markets, sound money.